Wal*Mart

Bad for Individual Wealth and Detrimental to Local Wealth

February 5, 2005

I want to start by disagreeing with Lloyd (as quoted by Quint)
about the fact that jobs are a cost. I do not agree that jobs are a
cost. Bad jobs may be a cost, and undesirable jobs may be a cost, but
a good job is part of an individual's wealth. I believe I can support
this opinion with Lloyd's argument that happiness is a form of wealth,
and if you are happy with/from/because of your job, then the job is
part of your wealth, not just a means of obtaining the wealth. Also,
what is a good job for one person is not necessarily a good job for
another person. I worked in a machine shop for a while, and yes, I
could pay my bills, but I had no interest in the work and was not very
productive. This doesn't mean that for the two welders in the shop the
machine shop was a bad job, they seemed to enjoy what they were doing
and to be good at it. At the risk of sounding like a bleeding heart
socialist, to each according to his needs, from each according to his
ability... or at least from each according to his aptitude...

So, why do I think that places like Wal*Mart are not good for
people? There are several reasons, and I believe that they all revolve
around decreasing the wealth of Wal*Mart communities, Wal*Mart
employees, and Wal*Mart customers. But I think the problem is really,
as Aaron put it, people (at least as consumers) are stupid.

People buy stuff at Wal*Mart because they believe it is less
expensive and because it is convenient. I say 'they believe it is less
expensive' because I do not think it isfor several reasons.

First, often the less expensive product at Wal*Mart is of a smaller
size. The price difference between the less small size available at
other locations and the Wal*Mart item is comparable to the size
difference, but in some cases, the price difference is less than the
size difference. Yes, you may be able to buy a tube of toothpaste for
less, paying $0.97 for a 4.6oz tube of toothpaste at Wal*Mart
vs. paying $1.35 for a 6.4oz tube is a wash, and paying $0.97 for a
4.6oz tube vs. $1.29 for a 6.4oz tube is a loss. Though the purchase
at Wal*Mart was less money out of pocket right now, in the long run,
it reduces this individual's wealth by making them have to return more
often or by outright charging them more. Granted, even at a higher
price, smaller items can be more economical if the item has a shelf
life, and if that shelf life is shorter than the time it is likely to
take to use the item, but in most cases, I do not believe that item
expiry is relevant with Wal*Mart items (though, with a Super Center,
food is still food). The person who purchased the less costly
toothpaste at Wal*Mart did not, in fact increase his wealth. This
person, in fact, lost wealthif for no other reason than having
to return sooner to buy more toothpaste.

Also, regularly the less expensive item at Wal*Mart is of lower
quality. I must concede to Clacy that if you are buying shoes for
children who are going to outgrow them in 6 months, it doesn't matter
if the shoes last one year or ten years, if they make it past 6
months... (or even close enough to 6 months). However, with many
items, you are purchasing an item that will not last as long as the
price difference to the higher quality, longer lasting item would
justify. If you spend $0.50 on a widget that will last 4 months, when
you could get a better widget for $1.00 at another location, and the
better one would last a year, if the widget was something you needed,
then the $1.00 widget saves you both money and time. It saves you
money, because to get the same usage time on cheaper widgets, you
would spend $1.50 for each $1.00 you spent on higher quality
widgets. In addition, unless you knew that the widget would only last a
short time and that you would need to buy replacements, and bought
them all at once, you are loosing time by having to make a trip back
to get additional widgets.

Another thing you run into at the big box stores are the many times
when the big box price is not the low price. Consumers are deceived
into knowing that when they shop at Wal*Mart, they are getting the
best price on the product, but often the price is not, for example,
microwaves that are $157 at Wal*Mart but $149 elsewhere. The big box
stores do this to supplement their falsely deflated prices in new
locations where the community has not bought into the lie that they
can save money at the big box store, or in locations where the
consumer base does not support the overinflated big box store
itself.

Another layer of this lying from the big box stores, which I know
Quint has observed at the Wal*Mart here, and I have seen at Wal*Marts
elsewhere, as well as at Petsmart and Target, is the bright, shiny new
"just reduced" tags hanging off a price marker that is so old and worn
it is barely readable. These "just reduced" tags wither do not show a
price at all, or show the same price that is on the old, worn sticker,
but many consumers do not seem to pick up on this.

One big thing you get from local merchants and specialized stores
that you do not get from big box stores, is knowledgeable and helpful
staff. When you go to a local merchant to research or purchase a
product, you can get personalized help, from someone who can talk to
your needs and wants and help you to purchase the correct item, rather
than the best buy or the most elaborate piece. In many cases, this
does mean that the eventual purchase price will be higher in the long
run if you deal with the local merchant, but you are paying for a
service. I can understand Lloyd's argument that he does not want to
supplement the service charges for other customers when he is
purchasing an item that he does not need assistance purchasing, but
there are still several other considerations on this front. First, it
is likely that sooner or later, you will need the service, or that a
friend of yours will need the service, and by not supporting the
business that provides the service, this business will be run out of
business, then when you do need the service, it will not be
available. Second, in many cases, even when you purchase from the big
box store, you are paying for the serviceor a significant part
of itwithout ever having any chance of receiving the
pay-back. At leat when you are supplementing the costs of customer
service from a local merchant, you are paying for a service that
exists and that you can make use of.

To get back to the wages and jobs issue... Believe it or not, when
a big box store opens up, other businesses struggle. To accommodate
the drop in business, which is more significant from a big box store
than from another local competitor, these businesses often have to let
people go. This will result in a net decrease in the available local
jobs, as well as usually a decrease in the salaries or wages paid to
the workers. This constitutes an overall reduction in the wealth of
the local consumers. This reduction in wealth is the very thing that
the big box stores thrive on.

The big box stores perpetuate their own existence by reducing the
spending money that their customers have. The start this by providing
jobs where there weren't any, and because there weren't any, they can
pay lower wages than the local businesses can. Meanwhile, the local
stores pay people closer to what they are worth, and try to provide
the best for their employees that they can. Once the big box store
starts taking business from the other retailers, the retailers have to
cut back. One of the first things they have to do is reduce expensive
things, like staff. Since the low-paid big box employee is expected to
do a little in each section of the big box store, there are net fewer
jobs in the community as the local shops cut staff and possibly
eventually close. Additionally, these fewer jobs are at a lower pay
rate, meaning the the people who are employed, on average, in the
community are making less money than they were before. Now, whether
jobs are a cost or are part of your wealth, when there is a loss of
jobs, there is a loss of wealthif you are not making any money,
you are not accruing wealth.

Coupling this with the big box advertising scheme that encourages
people to believe that:

the price at the register is the only thing that matters and

that everything is always less expensive at the big
box stores

People are encouraged to, against their own best interest, shop at
the big box stores. This further decreases the wealth of the
individuals shopping at the big box stores as described above. In
addition, the loss of the businesses that provided services to
customers along with sales, or their reduction in services to stay
afloat when competing with a big box store, reduces the wealth of the
community as a whole.

When a big box store comes to town, though there is an initial
increase in job availability, over the long term, there is a net
decrease in jobs, a net decrease in salaries, and, therefore, a net
decrease in individual wealth. In addition, the loss of the services
driven local merchants coupled with the loss of the individuality of
the community through the loss of these merchants constitutes a loss
of wealth of the community as a whole.

In addition to harming the local economy and consumers by reducing
the choice of retail outlets from which a consumer can purchase goods
and services, big box stores also cause damage by reducing the
selection of product available. Like smaller stores, big box stores
tend to only offer a limited selection of items, and tend to only
stock part of any given product line. However, when a local merchant
will deal with special orders to get lower volume items in for a
specific customer, the big box stores do not provide this service. If
it isn't on the shelf at the big box store, you could check back next
week to see if they have it in, but it is unlikely that they will
order anything for you. Also, while any given small merchant will
only stock some brands and part of those lines, the different local
merchants will often stock different brands and lines, making for
better availability and better product selection to the consumer. The
big box stores tend to have the same selection (though often with
merchant specific SKUs and model namesor even with merchant
specific 'brand' names) of products from the same manufacturers and
vendors. This variety reduction is another loss of wealth for the
community at large.

Another loss of wealth to the community when big box stores come to
town is that more of the money that goes into a local merchant stays
local. On average, for every dollar spent at a local merchant, 70
cents is kept local to pay wages, utilities, and to purchase goods (as
well as profits), while only 25 cents on the dollar spent at a large
chain store is kept local. That's less than 50% of what a local
merchant will keep local. This is a loss of potential income for other
businesses in the area (local or big box) and a reduction in local
wealth distribution. This reduces that ability of a local community to
support new businesses and new jobs, and makes the community more
reliant on the big box stores themselves.

Now, to return to the subject of stupidity, I believe, as I
mentioned above, that, as Aaron stated, people in general, and
particularly people as consumers, are stupid. Many individuals are
intelligent, but when it comes to actions of masses, the evidence does
not seem to reflect intelligence. In addition, people as consumers and
contradictory, possibly even to the point of being hypocritical. Also,
people cheat the system, going to the local store to get the service,
then making their purchase elsewhere after getting the service,
support and information they need. Often over as little as a 2% price
difference.

So, people are stupid. This can be illustrated by cases like this:
Customers will come in to Bozeman Pet Center and check out our prices
on fish. They will see our rock of 6 tanks with all the fish and
plants priced at $0.99 and decide that they are interested in the
small neon tetras. They will ask a couple of questions, then
leave. They will go to Wal*Mart and look at the fish selection there
and see that Wal*Mart does not have neon tetras that cheap, theirs are
$1.27. Then they will drive over to Petsmart and find out that they
have neon tetras for $1.29. Then they will drive out to Fishy Business
at Four Corners to find that they have neon tetras for $1.25, then to
PetCetera in Belgrade to find that their neon tetras are also
$1.25. Then back to Bozeman Pet Center to purchase the fish. At this
point, they would have to buy dozens of neon tetras at the $0.99 price
to even break even on their price investigation.

Now, it's one thing to visit all the local pet stores when you are
first getting started to get an idea of what is available and what
prices might be, and also to get an idea of the quality of service and
the knowledgablity of the staff, and product availability. And it is
also a good thing to visit the stores from time to time to observe
differences or changes in the various retailers, but when you are
looking at a specific purchase, shopping around, unless it is a big
purchase, such as a car or a furnace, is expensive and often counter
productive.

Another piece of consumer stupidity illustrated in the example
above, is that most of the people who go through a process like this
are still convinced that the big box stores will have the best
price...

On the point of contradiction, there are several interesting
items. One is the 'controversy' around the opening of the new super
Wal*Mart here in Bozeman. Wal*Mart came to the city and filed for a
building permit. The city denied the permit because the building
violated several Bozeman building codes. Wal*Mart applied for an
exemption and was denied. Then Wal*Mart asked the city to conduct a
survey, because, they claimed, a survey of the people would show that
the people want a Super Wal*Mart, and therefore Wal*Mart should get
their permit. So, the city sent out a survey. The survey came back
overwhelmingly against a Super Wal*Mart, so the city told Wal*Mart
no. Wal*Mart claimed that the survey, being conducted by the city was
biased against Wal*Mart and therefore irrelevant, and sent out their
own survey. This survey also came back overwhelmingly against having a
Super Wal*Mart, so the city again said no. At this, Wal*Mart said that
was fine, they would just build in Belgrade where they didn't have to
deal with the same zoning regulations. So, Bozeman gave Wal*Mart their
building permit. The thing that is odd about this, is that after twice
giving an overwhelming vote against a Super Wal*Mart, the people of
Bozeman keep the Super Wal*Mart parking lot full of cars all the
time.

Another one that comes up quite frequently are the letters to the
editor of the Chronicle along these lines. Explaining to people that
buying locally benefits the community, benefits the local people,
creates better jobs, etc, and that the bog box stores take away the
uniqueness of the community, and frequently that is at least part of
why people moved here in the first place. These are frequently
followed up with letters about how right they are and assorted other
'me too' type responses, and when you talk to people they tell you how
nice it is to work with various local businesses and how much better
the service is, and how you feel you leave the store with what you
needed and the information you need to complete your tasks, but they
turn around a week later and tell you how great it is that we finally
have a Target, and a Home Depot, and a Super Wal*Mart, and a
Petsmart. I can understand Carrie's argument about businesses in
Helena that were not helpful, and that she could go to a big box and
get better service, though this seems to be the exception rather than
the rule. But, unfortunately, these businesses are not only not the
only ones hurt when the bog boxes come to town, they are often hurt
less when the bog boxes come to town than the stores that do provide
the extra services. This is contrary to Lloyd and Clacy's arguments
that the only businesses that are (or can be) hurt by the bog box
stores coming to town are the ones that don't deserve to exist. It is
in fact, the businesses that can actually provide better service and
strive to help people rather than just rip them off that are most hurt
by the influx of big box stores.

Another issue is that people will cheat. They will come in to the
local merchant's establishment, ask questions of the staff, learn what
they need to know to make the right purchase, then turn around and
purchase somewhere else where they believe that they will save
money. This happens constantly in the pet industry, where someone has
made a purchase at Petsmart or Wal*Mart and then comes to Bozeman Pet
Center or Fishy Business to figure out why all of their fish are
dying, or why their bird is pulling out its feathers, or why their
lizard lost all its color, only to find out that they were not
provided sufficient information to start with or were sold
significantly inappropriate equipment for the animals they
purchased. The inverse also happens quite frequently. People will come
in and spend time with an employee to find out how to set up a good
environment for their pet, and how to care for it, and then go
purchase their equipment on-line or from a big box store (often at a
higher price than they would have paid hand they purchased their
equipment when they were asking questions, then return to us to ask
more questions about a pet and equipment that they purchased
elsewhereor nearly as bad, they will purchase their equipment
elsewhere and then purchase their animal from us, when the animal
costs us nearly as much as the advice (which is why the local pet
store is very likely to have better selection of healthy animals than
the big box store to begin with).

This doesn't only happen in the pet trade, though these examples
are the ones that I am most familiar with. This also happens with
stereo equipment, computers, small appliances, printing, and hardware,
just to name a few. When I worked at Avicom, people would come in and
talk to our techs about hardware and what they should get to meet
their computing needs, then come in a week later with an e-Machine or
a Gateway for us to set up their Internet access. At least they were
getting the intereat access through us, but Internet access, unless
they used it for several years without need of tech support, would not
cover the expense of the consultation on their computer hardware.

I am aware that there are statistics that show that big box stores
don't (or even can't) hurt local businesses, and that there are also
statistics that show that big box stores help small businesses, but I
would question the validity (and even the source) of these
statistics. There are also statistics that show that the average
income of a community will drop and that long-term unemployment rates
will increase in communities where the big box stores have come in. In
fact, Petsmart, for example, is not only proud of the fact, but they
state it as one of their goals that when a new Petsmart is opened in
a community, within 6 months, 30-50% of the local bet stores should be
run out of business! Yes, many big box stores will send customers to
local businesses when they have product questions, but generally this
is post purchase, and either way, this is sending people to create an
expense at the local business and further hurt that business, with
little chance of compensation to the local business and little risk of
loss of business to the big box store.

I have not seen any arguments that do not contradict the
presentable facts, that a Wal*Mart, or any other big box store, is not
only not good for the community, the consumers, local businesses, and
the local economy, but is actively bad for them.